Canada offers more avenues for overseas LNG exports

Though Dominion Resources’ Cove Point LNG project on the shores of the Chesapeake Bay is the only liquefied natural gas export project planned on the U.S. east coast, a handful of Canadian projects hold great potential for Marcellus Shale gas.

Five LNG export projects — all in varying stages of development — are being planned for Canada’s Atlantic coast. It is likely all would need natural gas from the Marcellus play to meet international demand.

The high volume of LNG export plans is in response to shifting demand and recent changes by pipeline operators.

Houston-based Spectra Energy announced earlier this year its desire to reverse the flow of the Maritimes and Northeast Pipeline, built in 1999 to move gas south from Nova Scotia Sable Island fields. But with abundant supply in the Marcellus play and increasing demand in the northeastern United States, Spectra wants to start sending gas from the U.S. north.

That decision has spurred interest in developers from New Brunswick to Nova Scotia, who seek either to repurpose existing import terminals or build new facilities to capitalize on the new supply.

And in Canada, where coastal population density is far less than in the United States, it is easier to launch large industrial projects with less community opposition.

The Goldboro LNG export project in Nova Scotia is working its way through the regulatory obstacle course. But if all goes to plan, the terminal could start pulling anywhere from 300 million cubic feet to 500 million cubic feet of Marcellus gas each day, said Mark Brown, director of project development for Pieridae Energy, a Calgary-based infrastructure development company that has proposed the export terminal.

“It seems many producers in the Marcellus region have excess supply,” Mr. Brown said. “We would hope they see this as an opportunity.”

The project would use existing pipelines to reach the site of the export terminal in northeastern Nova Scotia on a harbor near the Atlantic Ocean. The site would be able to ship the equivalent 1.3 billion cubic feet of gas per day (Bcf/d), with most of the supply coming from Canadian fields. The company already has a contract with a German buyer for about half of that gas load.

Unlike Dominion’s Cove Point project, which is nearing regulatory approval after several public and legal battles with environmental groups, Goldboro LNG has had “quite the opposite” experience, Mr. Brown said.

The project received a favorable environmental assessment from the Nova Scotia minister of the environment earlier this year, and a recent public opinion survey conducted by the company revealed 86 percent support from local residents. The remaining 14 percent had no opinion, Mr. Brown said.

“We’re in a very rural area that’s very pro-development,” he said.

The company hopes for final approval before the end of the year, with construction beginning in 2015 and shipping beginning in 2019.

Other Canadian projects are far less developed as several companies are mulling their options.

The Canaport LNG import facility in Saint John, New Brunswick, was identified by Canadian provincial governments as a prime candidate for Canada’s foray into the overseas export market. But despite reported interest from Spanish energy company Repson, which owns 75 percent of the operation, to invest $2 billion to install export terminals, no firm plans have been announced.

Indian company H-Energy has announced plans for a $3 billion export terminal in Melford, Nova Scotia, north of the Goldboro LNG project in the same county. H-Energy already has memorandums of understanding for half of its 1.8 Bcf/d export capacity and plans to be in operation by 2020. But the plan is still conceptual, and H-Energy has two years before it has to decide whether to go ahead with the project, according to Halifax, Novia Scotia, newspaper The Chronicle Herald.

Calgary-based Husky Energy is also exploring an LNG export project, the size and scope of which is to be determined.

Last month, Liquefied Natural Gas Ltd., based in Perth, Australia, acquired the site of a previously proposed LNG import facility in Nova Scotia for $11 million and announced plans to build an export terminal. That facility would ship the equivalent of 0.5 Bcf/d. The company said the facility would have the ability to expand.

The progress is good news for Marcellus developers, who reached record extraction levels in July by producing more than 15 Bcf/d, according to the Energy Information Administration. Because of the ample supply, natural gas prices remain low.

John Felmy, chief economist for the American Petroleum Institute, said export projects could spur even more development in the Marcellus region as overseas market prove lucrative.

Domestically, he said, models predict natural gas exports could raise prices either a few cents per thousand cubic feet to 35 cents per thousand cubic feet. But overseas markets will pay almost three times as much for that same gas.

“It really comes down to supply and demand curves,” Mr. Felmy said.

He also stressed the need for more LNG export projects in the United States and suggested the Port of Philadelphia could be a logical location for future development.

Michael Sanserino:, 412-263-1969 and Twitter @msanserino.

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